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The nature of investing is that you win some, and you lose some. And there’s no doubt that Sientra, Inc. (NASDAQ:SIEN) stock has had a really bad year. The share price is down a hefty 70% in that time. Longer term shareholders haven’t suffered as badly, since the stock is down a comparatively less painful 8.3% in three years. Shareholders have had an even rougher run lately, with the share price down 25% in the last 90 days.
Because Sientra is loss-making, we think the market is probably more focussed on revenue and revenue growth, at least for now. Generally speaking, companies without profits are expected to grow revenue every year, and at a good clip. Some companies are willing to postpone profitability to grow revenue faster, but in that case one does expect good top-line growth.
Sientra grew its revenue by 62% over the last year. That’s a strong result which is better than most other loss making companies. Meanwhile, the share price slid 70%. Typically a growth stock like this will be volatile, with some shareholders concerned about the red ink on the bottom line (that is, the losses). We’d definitely consider it a positive if the company is trending towards profitability. If you can see that happening, then perhaps consider adding this stock to your watchlist.
It’s probably worth noting we’ve seen significant insider buying in the last quarter, which we consider a positive. On the other hand, we think the revenue and earnings trends are much more meaningful measures of the business. So it makes a lot of sense to check out what analysts think Sientra will earn in the future (free profit forecasts).
A Different Perspective
The last twelve months weren’t great for Sientra shares, which cost holders 70%, while the market was up about 7.6%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Shareholders have lost 2.9% per year over the last three years, so the share price drop has become steeper, over the last year; a potential symptom of as yet unsolved challenges. We would be wary of buying into a company with unsolved problems, although some investors will buy into struggling stocks if they believe the price is sufficiently attractive. It is all well and good that insiders have been buying shares, but we suggest you check here to see what price insiders were buying at.
If you like to buy stocks alongside management, then you might just love this free list of companies. (Hint: insiders have been buying them).
Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on US exchanges.
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